Big banks slash jobs, bristle over rates

Banks are positioning themselves not to pass on in full the next interest rate cut by the Reserve Bank of Australia, as Westpac Banking Corp unveiled plans to slash up to 560 positions to offset a profit squeeze.

Most job losses will be in Sydney across head office, technology and mortgage processing as the bank responds to weakening revenue due to tepid demand for loans. Westpac’s executive in charge of cutting expenses, Peter Hanlon, said the cuts and outsourcing of jobs to India was “about transforming the ­business for the way the Australian economy is being shaped, because we are in for a period of very low credit growth”.

The job cuts came as ANZ Banking Group chief Mike Smith called the political debate on bank profits and interest rates “irrational” ahead of Tuesday’s Reserve Bank of Australia board meeting.

A senior banking source said yesterday the banks had reluctantly passed on the December rate cut by the RBA because of political pressure and softness in the economy.

The Australian Bankers’ Association (ABA), which Mr Smith chairs, said yesterday that while the RBA influenced short-term interest rates, other factors, such as international money markets and aggressive pricing of deposits, meant the cash rate was no longer an accurate indicator of bank funding costs.

But Treasurer Wayne Swan said banks’ high returns meant they could afford to pass on in full any cut in the cash rate by the RBA.

“The major banks are hugely profitable, with net interest margins around their average over the last decade and their return on equity much higher than most of their global banking peers,” Mr Swan’s spokesman said last night. “The government certainly wouldn’t support a decision by any of the banks to hold back the full benefit of any interest rate cut and customers would have the right to be angered by such a decision.”

Mr Smith said bank profits were ultimately returned to people through their superannuation fund investments or reinvested into extra bank capital that enabled further lending to support the economy.

He also slapped down a suggestion by shadow treasurer Joe Hockey for the RBA to be the referee on whether banks should pass rate cuts on in full.

“I don’t believe it’s the RBA’s job to do that,” Mr Smith said. “The RBA’s role is to conduct monetary policy, help manage financial stability and protect depositors, and it is doing a good job of that.” Mr Smith’s comments coincided with a pre-emptive strike by the ABA before next week’s RBA board meeting, which financial markets are betting will cut the cash rate.

The ABA published data showing that about 60 per cent of funding came from deposits, 20 per cent from money borrowed for less than 12 months from other banks, pension funds and investors, and the remaining 20 per cent for a longer period usually from overseas.

Mr Smith said the increased cost of wholesale funding and deposit rates was forcing banks to review their costs, which had built up over two decades of high credit growth. Reflecting cost pressures and weak credit growth that is plumbing 20-year lows, Westpac yesterday joined ANZ Banking Group and insurer Suncorp Group in reducing its head count.

An ANZ analysis of Australian Bureau of Statistics data shows 35,000 jobs in IT, finance and administration, were dumped in the September quarter.

Finance Sector Union national secretary Leon Carter slammed Westpac for relocating 150 roles to India. “If a successful, big, iconic company like that can’t keep Australian jobs, then what the hell’s going on?” he said.

Workplace Relations Minister Bill Shorten said last night he understood banks had a right to manage their business. “But I hope we don’t see a breakout of corporate amnesia,” he said. “By that I mean taxpayers government-guaranteed the banks, so I hope that through consultation they can lower that 560 number and re­deploy jobs where they can.”

Westpac’s Mr Hanlon said after redeployment of about one-third of affected staff, about 300 to 400 people would be made redundant.

Mr Carter slammed Westpac and its institutional shareholders for being greedy. “Banks in this country are being run to make the rich institutional shareholders happy at the expense of the worker.”

“What more does a company need to do to keep jobs than make a multibillion-dollar annual profit and grow market share?” he asked.